Members of two Virginia Tech finance clubs, SEED and BASIS, are faced with a challenge that the average college student probably couldn’t fathom: managing of millions of dollars, all under the watchful eye of the university, of course.
SEED, or Student-managed Endowment for Educational Development, and BASIS, or Bond and Securities Investing by Students, are two independent, student-run organizations that have been given the opportunity to make money for the university while developing skills needed for future Wall Street careers.
Unlike similar programs at other universities, SEED and BASIS are not part of any academic curriculum and are completely volunteer-driven.
SEED began in 1993, when the organization was funded with $1 million after a successful proposal to the Virginia Tech Foundation, a non-profit organization established to receive, manage and disburse private gifts in support of Tech. Former Professor Don M. Chance felt that the campus needed an organization that could train students to manage a fund comprised of stocks in order to learn hands-on skills that would prepare them for jobs at financial firms.
“Co-CEOs” Benjamin Klauder, a senior finance major, and William Hudson, a senior finance and international studies major, currently run SEED.
“It’s about expanding beyond the classroom and going into the real world,” Klauder said. “It’s a nice middle ground between college and jobs. I think that’s what employers are looking for — a bridge between the two.”
Today, SEED runs the nation’s largest student-run investment portfolio, or collection of individual investments, as an extra-curricular activity. The stocks in SEED’s portfolio did so well in the 2008-2009 fiscal year that it posted a profitable gain of 3.92 percent despite a turbulent economy.
SEED training also has a secondary benefit — building personal wealth for its members who are still in school.
“One of the reasons why 80 percent of the people in SEED have their own portfolios is because, once you learn how to value stocks it builds your confidence to put your own money in the stock market,” Hudson said. “That’s why so many of us manage our own money now.”
BASIS, on the other hand, is the newer of the two organizations. Funded in 2006 with one percent of the Virginia Tech Endowment, or $4.1 million, its goal is to manage a fund consisting only of bonds, which are essentially packaged IOUs sold to the public by businesses and government entities. This distinction has made it only one of seven groups in the nation focused on managing a bond fund. The other six are located at the University of Minnesota, University of Wisconsin, University of Texas, University of Dayton, Villanova University and Ohio University.
Like SEED, BASIS’s portfolio posted a profitable gain of 2.68 percent for the 2008-2009 fiscal year and beat the Merrill Lynch benchmark, a conservative financial standard, which it judges its investing performance against. In December 2008, BASIS’s investing efforts were so successful that it returned $700,000 back to the VTF while maintaining its original fund allocation.
“They’ve given us the money for two reasons,” said Eric Eichelberger, BASIS co-CEO and senior engineering major. “One is to produce competitive returns for the university and use that money toward scholarships and programs. The other is to push education, to take kids’ classroom skills and move them into a more real world setting so when they come out of school, they’re a step ahead of everyone else.”
Modeled after financial firms, both SEED and BASIS are headed by two co-CEOs and have departments broken down into sectors that are led by managers with an industry specialty. Below the managers are analysts who conduct the research for future investment buy and sell recommendations.
During their information sessions, both organizations stressed the importance of a 20-hour weekly time commitment. Much of this time is spent in meetings discussing the ever-changing economy and financial climate. Occasionally the groups get together to listen to the many Wall Street guests they invite throughout the year. Most importantly, both groups plan trips to New York City regularly to meet with Tech alumni and network, but the bulk of the time commitment is spent by members conducting individual research for assignments.
Membership in both clubs is open to all majors and requires both an assigned project and interview. Prospective members are given time to research their given topic and told to present it before a panel. Then they are questioned continuously for further explanation.
“You get an e-mail and they assign you a company and tell you to research that company and do a presentation on whether to buy or sell the stock,” said senior finance student Yoori Cho, SEED analyst and portfolio manager for the financial sector. “The interview has two parts: a technical and behavioral part. They’re both really nerve-wracking, and I’ve never had any serious interviews like that.”
Both BASIS and SEED look at a variety of factors when admitting a new incoming class. Students are admitted based on the success of their research and interviews along with the unique experiences they can contribute. High GPAs aren’t the primary reason for inclusion, but having a 3.5 will certainly merit attention since both groups agree that good grades reflect academic seriousness, commitment and discipline.
“In SEED and BASIS, I think we have some of the best students in the college,” said Professor George Morgan, a SunTrust professor of finance for the Pamplin College of Business and BASIS faculty co-adviser. “Best in terms of academic performance and grades and interaction with the faculty. But also in terms of the drive that they have, the ambition, the willingness to sacrifice other kinds of activities. ... It does count for a lot in terms of getting positions on Wall Street because that’s what the Wall Street people want.”
Despite Tech’s No. 42 Pamplin School of Business ranking in this year’s U.S. News and World Report, its students might find it hard to compete with the likes of the Wharton School of the University of Pennsylvania and the New York University Leonard N. Stern School of Business graduates on Wall Street. Still, Tech’s status as a non-target school by the investment firms has made membership in SEED and BASIS that much more valuable.
“When you talk about getting a competitive placement at Goldman Sachs in 2009 by a non-target school like Virginia Tech, we wouldn’t have been able to have done that without BASIS or SEED,” said professor Derek Klock, a finance professor and a faculty co-adviser. “It’s something that would not be considered from a non-target school. They have lots of folks that come in from Wharton, Stern, MIT, the University of Virginia, and to keep the traction going for Virginia Tech is crucial.”
The benefits of the organizations can be measured by the success stories of former members who have graduated. Earlier this month, alumnus Nicholas D’Angelo visited campus to speak as part of the Wachovia Distinguished Speakers Series. A former member of SEED, he rose through the ranks of Wachovia, which was recently bought by Wells Fargo, to become vice president business manager of global fixed income trading at Wells Fargo Securities.
D’Angelo addressed the audience on the virtues of Ut Prosim and through a follow-up question and answer session, gave advice to students on where to start when entering the job market.
“SEED provided me with real-world experience that gave me an edge over students at other schools who didn’t have such a program,” D’Angelo said. “We all learned similar theory of course, but being able to apply that theory in a real world setting gave me an advantage over my peers.”